Stocks are categorized according to market capitalization value of the company. Market capitalization is determined by multiplying the current price of the stock with the number of outstanding shares of the company. According to market capitalization stocks are categorized as large cap companies, mid cap companies and small cap companies. Generally if a company has market capital of less than Rs 1 billion then the stock of that company is called small cap. A complete detailed information about small cap stock investments follows.
Small Cap Stock Investments
The number of investors who generally prefer to invest small cap stocks are very high. There are so many reasons for small cap stock investments. Some of them are detailed below:
- Biggest reason for small cap stock investments is that large cap companies were small start ups at a some point of time. So those small cap are likely to become big in the future. With this logic lot of investors are attracted towards small cap stock investments.
- Small cap stock investments will give long term investment opportunities. Long term investors prefer small cap companies to earn huge profit.
- Small companies can grow rapidly thus offering good return on your investments. But again these investments are long term as these small cap stock investments won’t fetch you profits over night.
- Investors can double their profit by involving with small cap stock investments. These investments can earn them good profit as small cap companies can afford to take huge risk compare to large cap companies.
- Small cap stock investments can give you sleepless nights as they are sensitive. Any stock market volatility might affect small cap share prices. Investors need to analyze these trends in order to make wise investments.
- Small cap stock investments can be done even with small investment portfolio as these company stocks go unnoticed.
Its wise thing to invest in small cap stocks as it might fetch you good profits irrespective of whether your are investing in small period or longer period. you have to wait for years to make good profit for long term small cap investments.